BoE: Loans for home purchases down 70%

The mortgage squeeze on the property market has tightened further with official figures showing loans for home purchase diving almost 70% year-on-year in June.

Tumbling: The Bank of England has reported mortgages for homebuyers tumbling by almost 70% year-on-year

Latest figures from the Bank of England revealed that 36,000 mortgages were approved for home purchases in June, the lowest figures since comparable records began in 1993.

Mortgages for homebuyers in June, which is typically one of strongest months of the year for mortgages, were just half the 72,000 recorded in February - one of the market's traditionally quietest months.

'Very low mortgage activity suggests that house prices will continue to head south at a pretty rapid rate,' he said.

'Indeed, in addition to extremely muted mortgage activity, latest survey evidence shows that agreed house sales are very low, buyer interest is weak, it is taking much longer to sell a house, and sellers are achieving a falling percentage of their asking price.

'All these factors point strongly to further declines in house prices.'

Land Registry figures, released yesterday, showed annual house price growth almost flat in June at 0.1%. It said the average house price in England and Wales fell by 1% in June to £180,781.

The Bank of England said the number of mortgages approved for house purchase in June was 68% lower than the 114,000 in June last year and has continued the downward trend shown throughout the year.

The six-month average for mortgages approved for home purchases stands at 62,000 per month, compared to 115,000 in June 2007.

Economists say the mortgage drought is driving the rapid slowdown in the property market, with mortgages for home purchases falling 12% from May to June and remortgages falling 7% over the same period, from 90,000 to 84,000.

The sharp decline in the mortgage market has come as lenders find it difficult to secure wholesale funding and the market for mortgage debt sold on as asset-backed bonds has almost completely dried up.

Just £16.8bn worth of lending secured on residential properties was approved in June – 31% below the six-month average and almost half the £32.1bn in June last year.

The Bank of England figures showed net mortgage lending fell back to £3.1bn in June from £3.8bn in May and £5.9bn in April. The lowest level since October 2000 and considerably lower than the £6.3bn monthly average for the previous six months.